Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4)

[2020] NSWSC 553

Supreme Court

New South Wales

Medium Neutral Citation:

Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553

Hearing dates:

9 April 2020

Decision date:

12 May 2020

Jurisdiction:

Equity

Before:

Robb J

Decision:

See pars 21, 30, 55, 78, 92, 233, 264, 269, 308 and 311. Note the alternative approach at pars 234 to 241. Parties are to consider these reasons for judgment and to provide my associate with draft short minutes of order to give effect to them.

Catchwords:

COSTS — Party/Party — Exceptions to general rule that costs follow the event – whether, in the circumstances, separable events can be identified – whether costs should be apportioned in a case where a number of parties have succeeded and failed on substantial issues – where discretion must be applied to obtain a ‘fair and just’ result – whether certain parties should be ordered to bear their own costs

 

COSTS — Party/Party — Orders when proceedings involve multiple parties — Bullock and Sanderson orders – where the circumstances indicate that a Sanderson order should not be made

 

COSTS — Security for costs – whether monies paid as security should be released

 

CIVIL PROCEDURE — whether an inquiry and account as between mortgagor and mortgagee should be ordered on the present state of the evidence – where there is a question as to whether in part the mortgagee or receivers and managers appointed by the mortgagee are the proper accounting parties

 

CIVIL PROCEDURE — Stay of proceedings — Inherent power – where an interim stay of proceedings is granted on a short-term basis notwithstanding risk that the successful plaintiff may not be able to recover judgment from unsuccessful defendants

 

JUDGMENTS AND ORDERS — Entry — entry of judgment for damages because there is no longer a need for an inquiry as to damages

  JUDGMENTS AND ORDERS — Effect of – consideration of the extent to which an order should be made dismissing the balance of the claims for relief – where it would be premature to dismiss certain claims that underpin extant interlocutory orders

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Competition and Consumer Act 2010 (Cth)
Real Property Act 1900 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868
Almona Pty Ltd v Parklea Corporation Pty Ltd (No 2) [2020] NSWSC 167
Almona Pty Ltd v Parklea Corporation Pty Ltd (No 3) [2020] NSWSC 266
Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58
Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304
Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107
Bullock v London General Omnibus Co [1907] 1 KB 264
Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558; [2002] NSWCA 237
Chen v Chan (No 2) [2009] VSCA 233
Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440
Creak v James Moore & Sons Pty Ltd (1912) 15 CLR 426; [1912] HCA 67
Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75
Gujarat NRE India Pty Ltd v Wollongong Coal Ltd (No 2) [2018] NSWSC 1622
Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252
James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No 2) [2015] NSWSC 970
James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296
Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780
Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 724
Papantoniou v Brown [2015] NSWCA 168
Perry v Stopher (1959) 1 WLR 415
Riva NSW Pty Ltd v Key Nominees Pty Ltd [2014] NSWSC 301
Roache v News Group Newspapers Ltd [1990] TLR 551
Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82
Rowe v National Australia Bank Ltd [2019] WASCA 140
Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306
Sanderson v Blythe Theatre Co [1903] 2 KB 533
Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179
Willett v Thomas [2012] NSWCA 97
Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173

Texts Cited:

G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths)

Category:

Costs

Parties:

Almona Pty Ltd (plaintiff) 
Parklea Corporation Pty Ltd (first defendant) 
Secured Asset Portfolio III Limited (second defendant) 
PT Limited (third defendant)

Representation:

Counsel: D Williams SC / E Bishop (plaintiff) 
K Andronos SC / S Keizer (first defendant) 
EAJ Hyde / T Epstein (second defendant) 
M Izzo SC / J Taylor (third defendant) 

  Solicitors: Bartier Perry (plaintiff) 
Norton Rose Fulbright (first defendant) 
King & Wood Mallesons (second defendant) 
Corrs Chambers Westgarth (third defendant)

File Number(s):

2018 / 317496

Judgment

1. The principal judgment in these proceedings was delivered on 20 December 2019: Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 (Almona 1).

2. I invited the parties to confer and determine what short minutes of order would be appropriate to give effect to the reasons for judgment and to deal with the further conduct of these proceedings. Further hearings have occurred and submissions have been received: see Almona Pty Ltd v Parklea Corporation Pty Ltd (No 2) [2020] NSWSC 167 (Almona 2) and Almona Pty Ltd v Parklea Corporation Pty Ltd (No 3) [2020] NSWSC 266 (Almona 3). At [80] of Almona 2, I set out orders that I provisionally considered should be made at that stage. The proposed orders accommodated the fact that there were residual disputes between the parties, and it was always expected that the judgment in Almona 1 would leave matters for later determination, such as an inquiry as to the damages suffered by Almona and an accounting by SAP as mortgagee.

3. The Court then received further written submissions and draft short minutes of order from the parties, and a hearing took place on 9 April 2020. It became apparent that a number of aspects of the dispute had resolved as a result of adjustments to the position adopted by Almona as to the orders that should be made. Furthermore, it became apparent that the parties ought to be given an opportunity to provide further written submissions, particularly in respect of Almona’s claim to be entitled to a proprietary interest in the Land, and aspects of the dispute concerning the costs orders that should be made.

4. The Court has now received further written submissions from each of the parties.

5. The Court has also received amended versions of the short minutes of order contended for by the parties who remain in dispute. Those versions were the short minutes of order that Almona asks the Court to make, and short minutes of order prepared by Parklea, and Parklea’s short minutes of order marked up in revision mode by SAP, to indicate the orders that SAP joins with Parklea in asking the Court to make, as well as the orders as to which SAP and Parklea are in dispute. PT has also informed the Court of the orders that it contends should be made.

6. The new versions of the draft short minutes of order have had the beneficial effect that they have, to a significant degree, crystallised the issues that the Court is now required to resolve.

7. I will number all of the orders suggested by the parties sequentially, so that there will be a convenient means at the end of these reasons for identifying the orders that should be included in the short minutes of the orders that will be made.

Judgment for $4.25 million plus interest

8. The first issue for determination is whether the Court should now enter judgment in favour of Almona against Parklea and SAP for damages in the sum of $4.25 million, being the amount referred to in Almona 2 at [22]. Almona and Parklea submitted that judgment should be entered now. Parklea asks for judgment to be entered so that the time for it to lodge an appeal against this aspect of the decision in Almona 1 will begin. The orders proposed by Almona and Parklea differed in in some respects. If I make the order, it will be an amalgam of the two proposals, being:

1.   Judgment for the plaintiff against the first and second defendants in the sum of $4,250,000 plus interest of $921,660.57 for the period from 22 March 2016 to 28 February 2020 and accruing interest at the daily rate of $551.57 until the date of judgment.

9. SAP proposed that, instead of this order, the Court, at this stage, should make the following order:

2.   Order an inquiry be held by an individual to be nominated by the parties as to the loss and damage suffered by the plaintiff as a result of the Contract for Sale of Land being completed for a price that was $4.25 million less than the price that would have been paid had the Occupation Condition been disclosed to the plaintiff and that the first and second defendants pay to the plaintiff the amount of such loss and damage so determined.

10. In Almona 2 at [80], I indicated that I proposed to make order 1 substantially as now sought by Almona and Parklea. I gave reasons for my proposal at [28]-[33]. I recorded the basis of SAP’s further resistance to the making of this order in Almona 3 at [5]-[26].

11. The prayers for relief in Almona’s further amended statement of claim, filed on 4 March 2019, may be found in Annexure A to Almona 2. In prayer 3, Almona sought an order that there be an inquiry and that an account be taken of various matters including, but apparently not limited to, the exercise by SAP of its power of sale under its mortgage over the Land. One of the matters was: “(g) the quantum of any damages or equitable compensation payable by any of the first or second defendants to the plaintiff”.

12. However, prayer 7 sought an order for damages in the following terms:

7.   Damages including under [the Australian Securities and Investments Commission Act 2001 (Cth)] s 12GF and/or s 12GM or in the alternative [the Australian Consumer Law] s 236 and/or equitable compensation in such amounts as may be found due and payable after such inquiry referred to in paragraph 3.

13. In its further amended statement of claim, Almona pleaded in par 52(b) that, on 21 March 2016, SAP’s solicitors advised Almona’s solicitors that a contract had been exchanged on 13 January 2016 in respect of the Land, and the sale price was $81.1 million plus GST and adjustments. It alleged in par 54(a) that, on 22 March 2016, Parklea and SAP executed a further deed of variation of the Contract that had the effect that the purchase price was amended by deleting the provision for $85.35 million, in the event of satisfaction of the Occupation Condition. Almona alleged in par 61(h) to (j) of the further amended statement of claim that SAP breached its duty of good faith towards Almona, as mortgagee exercising a power of sale, by failing to inform Almona of the Occupation Condition, and executing the further deed of variation of the Contract. Finally, Almona alleged, in par 62(a), that SAP’s breaches were fraudulent, including in respect of concealing the Occupation Condition from Almona. Almona also relied, in par 62(b), of the matters set out in its statement of particulars at pars 1 to 36. Paragraphs 30, 34 and 35 gave particulars of concealment of the Occupation Condition, sacrificing Almona’s interests by preventing it obtaining an additional $4.25 million by way of surplus purchase price, and entering into the second deed of variation of the Contract: see Almona 1 at [393], [394].

14. Thus, the case pleaded by Almona in its further amended statement of claim sought payment of $4.25 million both for breach of SAP’s duty of good faith as a mortgagee exercising a power of sale and for fraud. This is made plain by par 77 of the further amended statement of claim, which relevantly alleges:

77.   By reason of the breaches of duty referred to in paragraphs 61 to 63…the plaintiff has suffered loss and damage being…(d). $4.25 million…

15. Almona responded to the submissions made by SAP, which I recorded in Almona 3 at [5]-[26], by abandoning all further claims for damages in excess of the $4.25 million to which it was found to be entitled in Almona 1. Consequently, there will be no need for the Court to conduct any inquiry to determine the totality of the damages suffered by Almona. Almona will accept the $4.25 million as exhausting its entitlement to damages.

16. Almona also relied upon the fact that SAP had not raised any cross claim against it. That is, as SAP had not asserted that it had a right to the payment of countervailing damages by Almona to SAP, Almona submitted, there is no substance in SAP’s claim that it will be denied procedural fairness, if judgment is given against it now for $4.25 million in favour of Almona, contrary to the basis upon which it understood the hearing was being conducted. The reason is that there is both no need for an inquiry as to damages, and no pleaded claims by SAP that may have given rise to an offsetting right to damages at the end of the inquiry.

17. Undaunted, SAP persevered by referring the Court, in its 16 April 2020 submissions, to the decision of the Court of Appeal in Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440. Beazley JA, as her Excellency then was, gave the principal judgment, in which Mason P and Bryson J agreed. Her Excellency said:

[35] Senior counsel for the Bank submits that the authorities and the commentaries in respect of claims by mortgagors against mortgagees in respect of the exercise of the mortgagee's power of sale are all to the same effect, namely that the proceeding is a claim in equity for an account.

[36] In Coroneo v Australian Provincial Assurances Association, Ltd (1935) 35 SR (NSW) 391, a mortgagor had brought common law proceedings in respect of the alleged irregular sale of old system land by the mortgagee. The mortgagee demurred to the pleading. Jordan CJ held at (395; 132):

"…The proper remedy of the plaintiff is a suit in equity in which, upon his offering to redeem or to account, he may, if he so desires, litigate the question of any alleged equitable delinquencies on the part of his mortgagee…"

…

[41] The various legal writings on the issue to which the Court was referred also speak with one voice as to the nature of the claim available to a mortgagor in such circumstances. In essence, the commentators state that an account is the appropriate form of relief where a mortgagee is alleged to have sold the mortgaged property at an undervalue or otherwise in breach of the mortgagee's duty in relation to sale: see E L G Tyler, P W Young & C E Croft, Fisher & Lightwood’s Law of Mortgage, Australian ed (1995); R P Meagher, W M C Gummow & J R F Lehane, Equity Doctrines and Remedies, 3rd ed (1992) Sydney, Butterworths; E I Sykes & S Walker, The Law of Securities, 5th ed (1993) Sydney, Law Book Co Ltd; D Browne, Ashburner’s Principles of Equity, 2nd ed (1933)…

…

[45] It might be thought that these statements go without saying, as the very reason a mortgagor would be pursuing the mortgagee is to recover the moneys to which he or she claims to be entitled but for the delinquent exercise of the power of sale. This is in fact reflected in the final order which is made in such matters. Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676, provides an example. That was a case in which the High Court determined that a mortgagee who, in the exercise of a power of sale disregarded the interests of a mortgagor, was liable to the same extent as a mortgagee who is liable for wilful default…

18. I am therefore bound to accept that, if the only claim made by Almona against SAP had been for breach of SAP’s duty of good faith, Almona would have been required to seek an account, and SAP would only have become liable to pay the $4.25 million to Almona, assuming no countervailing accounting issues were established, on the making of the final order at the conclusion of the accounting process.

19. However, Beazley JA also said:

[55] The Bank also submitted that the opponent's claim fell within s 134(1)(d) - namely, relief against fraud or mistake and the opponent was thus precluded from claiming under s 134(1)(h) by the parenthetical provision within s 131(1)(h). The basis for this submission was that a claim such as the present was a claim seeking relief against fraud.

[56] I do not agree. The authorities to which I have referred, and which are relied upon by the Bank, establish that the cause of action available to the opponent is a proceeding for accounts culminating in an order for payment of a balance due. That is juridically different from proceedings for relief against fraud.

20. As I understand this aspect of her Excellency’s reasons, a claim by a mortgagor for breach by the mortgagee of its duty of good faith in exercising its power of sale is “juridically different” from a claim for damages based upon a fraud committed by the mortgagee during the sale process. One claim is in equity for an account, and the other is a common law claim for the tort of deceit. This understanding is reinforced by her Excellency’s statement, at [40], that “it is arguably an open question in Australia whether there is available a common law claim in negligence against a mortgagee for, what I will describe loosely as a breach of the mortgagee’s duty of care in the exercise of a power of sale”. Her Excellency seems to allow that the equitable doctrine that requires a mortgagor to pursue a mortgagee who is delinquent in the performance of its duty of good faith in the exercise of its mortgagee’s power of sale by seeking an account from the mortgagee, does not prevent the mortgagor from separately pursuing a claim for damages at common law for any torts committed by the mortgagee in the sale process.

21. Accordingly, I consider that Almona is now entitled to the making by the Court of order 1, substantially in the form sought by it, as I have set out above.

Interim stay of order 1

22. Parklea and SAP seek an interim stay of order 1, for the purpose of permitting them to make a formal application for a stay of that order until the determination of all appeals and cross appeals.

23. The orders that Parklea seeks are (remembering that I am changing the numeration of orders to make them sequential for the purposes of these reasons):

3.   Order 1 above is stayed until the determination of any application for a stay in accordance with order 4 below.

4.   Grant leave to the first and second defendants to file and serve a notice of motion in support of a stay of order 1 pending determination of any appeal and/or cross appeal from order 1 above on or before 1 June 2020, such motion to be returnable on a date convenient to the Court.

5.   The plaintiff to file and serve any submissions and evidence in reply to any notice of motion filed and served in accordance with order 4 by 15 June 2020.

24. SAP supported the making of these orders, save that it left the dates in orders 4 and 5 open for determination by the Court.

25. Almona opposed the application for even the grant of a temporary stay, and submitted that, if a temporary stay is granted, the stay should be conditional upon Parklea and SAP paying into Court the sum of $4.25 million plus interest pending the determination of any stay application.

26. I note the submissions made in par 4(a), (b) and 4(c) of Almona’s submissions dated 21 April 2020 in response to Parklea’s 16 April 2020 submissions. Those submissions will be material on a fully contested stay application, and I will not address them now.

27. Almona referred in par 4(d) to the fact that Parklea is a special purpose vehicle within the Dyldam group, as is SAP within the PAG group, and to the reasons why there is doubt about whether Almona will succeed in recovering the full amount of the judgment to be made in its favour. Almona submitted that no stay, temporary or otherwise, should be granted unless the amount of $4.25 million plus interest is first paid into Court.

24. I accept that a genuine question arises as to whether a plaintiff in Almona’s position should be prevented by a stay of proceedings from attempting to recover a substantial judgment made by the Court against defendants in circumstances where there is real doubt about the willingness and ability of the defendants to pay the amount of the judgment to the plaintiff. The effluxion of time in which the plaintiff is prevented from seeking recovery may lead to a deterioration in the chances of the plaintiff achieving whatever recovery may have initially been possible. Depending upon the circumstances of the particular case, it may be appropriate for the Court to decline to stay judgment unless the defendants pay an appropriate proportion of the amount of the judgment into Court, or provide other appropriate security. The essential difficulty is that, if the Court makes an order staying the judgment, the plaintiff may in fact be materially prejudiced in recovering on the judgment at a later time, but the probability is that it will not objectively be obvious or provable that the plaintiff has been prejudiced. That is the reason why the Court should be wary of staying execution of a judgment against financially questionable defendants. I have previously considered this question in somewhat different circumstances: see Gujarat NRE India Pty Ltd v Wollongong Coal Ltd (No 2) [2018] NSWSC 1622, particularly at [89]-[91]. I should add that, in that case, a stay of judgment was ultimately made following the defendant paying a suitable proportion of the judgment debt into Court.

25. I do not accept Almona’s submission that the granting of a temporary stay should be subject to the conditions specified. The position may be different when the fully contested stay application is determined. The evidence does not support a conclusion that Almona faces a real risk of prejudice if the period of the interim stay is measured in weeks.

26. I accept, in principle, Almona’s complaint that the timetable suggested in Parklea’s proposed short minutes of order does not provide for an appropriate level of expedition. It will be preferable for the application to be dealt with by me, rather than the duty judge, if that can be accommodated by the Court’s diary. I will make orders in the form of proposed orders 3 to 5 with suitable dates being inserted, and a return date included in order 4 by arrangement with my associate. It would be preferable for order 4 to provide for the filing and service of submissions by the defendants at the same time as their notices of motion, to match order 5 in respect of Almona.

Charge against Parklea’s interest in the Land

31. In its submissions dated 8 April 2020, Almona claimed in par 35 that it was entitled to a charge or constructive trust over Parklea’s interest in the Land to secure payment to it of an amount that bears the same proportion to the market value of the Land as at the date of the completion of the Contract as the ratio 4.25:85.35, and an inquiry and account as to the benefits Parklea has received by its use of that proportion of the Land. Almona further submitted that, as the proportion is to be calculated as at the date of the sale, there is no need for any other enquiry as to the current value of the Land.

32. The genesis of this submission was observations made by the Court at [707] and [843] of Almona 1. Almona failed in its claim for an order setting aside the transfer of the Land by SAP, as mortgagee in possession, to Parklea, and also for an order setting aside the mortgages granted by Parklea to PT. However, Almona succeeded in establishing that SAP had acted deceitfully, and thus fraudulently at common law, in its failure to disclose the Occupation Condition to Almona and its concealment of the Occupation Condition by reason of the variation of the Contract. Parklea was found to have been a party to that conduct by SAP, in the circumstances in which it gained title to the Land for a price of $81.10 million, rather than the higher price of $85.35 million, which the Court found would have been paid had Almona been informed of the Occupation Condition in a timely manner.

33. In contemplating the relief to which Almona may be entitled, the Court expressed the possibility that equity may grant relief that would give Almona a proprietary interest in the interest in the Land retained by Parklea, after the paramount title of PT, as registered proprietor of its mortgages. The Court observed that it “may be arguable” or that the circumstances “may, in theory, justify” the Court declaring that Almona has a charge over Parklea’s estate in the Land. The Court observed, alternatively, that Almona’s interest may be quantified as being the proportion of the value of Parklea’s interest in the Land to which the amount that Almona failed to receive to the price that Parklea ought to have paid; that is 4.25:85.35.

34. When the orders that the Court should make at this stage of the proceedings were under consideration at the last hearing on 9 April 2020, it was clear that Parklea should be given an open opportunity to make submissions concerning the appropriateness of the Court making any other order against it than the order, which follows from the reasoning in Almona 1, that Parklea be ordered to pay Almona $4.25 million plus interest.

35. It will be noticed that Almona’s submission went even further than the relief contemplated by the observations made by the Court, and extended to a claim that Parklea should be subject to an inquiry and account as to the benefits that Parklea has received by its use of the relevant proportion of the Land.

36. Whatever might be said about the question whether the orders contemplated by the Court are available within Almona’s pleaded claim, it is clear that Almona did not include the subject matter of the inquiry and account the subject of its submission in prayer 3 of its further amended statement of claim.

37. Be all that as it may, when Almona delivered to the Court its proposed short minutes of order, they included an order in the following terms:

6.   A declaration that the first defendant’s interest in the Land is charged with and is security for the amounts due to the plaintiff under Order 1, such charge taking effect from the date of transfer of the Land.

38. This order is clearly narrower in its effect than the order described in par 35 of Almona’s submissions. I will proceed upon the basis that this is the order now sought by Almona.

39. It is not necessary to speculate on the reason why Almona now seeks the narrower order. It may be observed, however, that the order granting Almona a charge over the land determined by the ratio 4.25:85.35 could only ever have given additional value to Almona if the market value of Parklea’s estate in the Land has increased since the date the Contract was completed. If the proportion is determined as at the date of completion, the value of the amount charged would be $4.25 million. A present day valuation would be required, and that exercise may prove that Parklea’s interest in the Land only has a negative value anyway.

40. Although the order now sought by Almona would, if made, impose a charge over Parklea’s estate in the Land, Almona’s written submissions put its claim on the basis that the circumstances gave rise to a trust binding Parklea’s interest in the Land in favour of Almona in the relevant proportion. Almona relied upon authorities that dealt with the consequences of a theft or fraud leading to a transfer of property: Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58; Creak v James Moore & Sons Pty Ltd (1912) 15 CLR 426; [1912] HCA 67; and Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252. Almona’s submission was to the effect that a party in Parklea’s position, who participated in a fraud whereby property worth $85.35 million was transferred to it upon payment of a price of $81.10 million to the owner, held the property on trust for the owner in proportion to the underpayment, in the same way as if the transferee had stolen the relevant proportion of the property from the owner. The principles applicable to funds defrauded from their true owner were considered by Spigelman CJ in Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82 at [109]-[116].

41. Order 6, as formulated by Almona and set out above, would declare the existence of a charge over Parklea’s interest in the Land, and not a trust. Almona’s submissions have been ambiguous on this issue. In pars 11 to 13 of its 21 April 2020 submissions in reply to Parklea’s 16 April 2020 submissions, Almona returned to the claim for a declaration as to the existence of a charge. Almona did not explain the principle upon which equity would declare the existence of a charge in the circumstances.

42. Almona also submitted that the order sought could be made under s 243(h) of the Competition and Consumer Act 2010 (Cth), Schedule 2 (the Australian Consumer Law), which provides:

243 …   

Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those sections against the person (the respondent) include all or any of the following:

…

(h)   an order, in relation to an instrument creating or transferring an interest in land, directing the respondent to execute an instrument that:

(i)   varies, or has the effect of varying, the first mentioned instrument; or

(ii)   terminates, or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first mentioned instrument.

43. Section 237(1) of the Australian Consumer Law empowers the Court to make such order or orders as the Court thinks appropriate against a person who has engaged in conduct in contravention of Chapter 2, which includes the prohibition on unconscionable conduct, within the meaning of the unwritten law, in s 20. Almona pleaded a claim against Parklea based upon this prohibition in pars 73 to 76 of the further amended statement of claim. The Court found this claim proved at Almona 1 at [789].

44. Almona’s submissions did not contain any explanation as to how the Court could apply s 243(h) of the Australian Consumer Law in the context of the present case. It did not identify the relevant instrument, or specify the instrument that the Court should direct Parklea to execute. It did not explain how the new instrument should vary, terminate or otherwise affect the operation of the first instrument. It seems clear that the order that Almona now asks the Court to make is not in form or substance an order authorised by the section of the Australian Consumer Law that is relied upon by Almona.

45. In its further amended statement of claim, Almona did not clearly plead a claim for the relief that it now seeks by order 6 set out above. Almona sought orders by prayers 4 to 6 that, if made, would have had the effect that Almona became re-registered proprietor of the Land. Almona submitted that it had originally sought in declaration A(i) “a declaration that the first defendant holds the whole of the Land…on trust for the plaintiff”; and consequently there was “no impediment from a pleading or procedural fairness perspective to the finding of a constructive trust or charge on the first defendant’s interest in the Land”. Almona’s submission therefore was to the effect that its claim for a declaration that Parklea held the whole of the Land on trust for it encompassed a declaration that part only of Parklea’s estate in the land was held on trust for Almona.

46. Finally, Almona relied upon s 90 of the Civil Procedure Act 2005 (NSW) (CPA), which provides: “The court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires”.

47. Parklea responded by submitting first, that as a matter of principle the order now sought by Almona was not available, and secondly, that Almona had not pleaded a claim for the relief now sought, so that the claim should not be entertained.

48. Parklea submitted that the effect of the Occupation Condition was for the purchase price of the Land to be $4.25 million higher than it otherwise would have been, but the higher purchase price would not have been paid except upon settlement of the sale, at which point Almona would have had no remaining interest in the Land. Consequently, payment of the additional $4.25 million was conditional upon Almona losing all of its interest in the Land. When the Contract was entered into between SAP and Parklea, the latter submitted, Almona’s equity in the Land was transformed into an entitlement to the balance of the purchase price. Had the Occupation Condition been disclosed to Almona, and satisfied by Almona prior to completion, Almona’s right would merely have been to receive an increased amount of purchase price from SAP, not Parklea. The latter’s obligation was to pay the purchase price to SAP, not Almona.

49. I accept that the claim that Parklea holds part of its interest in the Land on trust for Almona, by reason of the circumstances in which Parklea paid a price that was $4.25 million less than it would have been had the existence of the Occupation Condition been notified to Almona, raises a difficult conceptual question. Were it necessary to decide the issue, I would be disinclined to accept Parklea’s analysis. If the relevant findings in Almona 1 are accepted, Almona started with ownership of the Land that was the subject of the Contract under which the price was $85.35 million, subject to the performance of a condition that Almona would have satisfied, had it known about the condition. Upon completion of the Contract, Parklea became the owner of the Land upon payment of $81.10 million, notwithstanding that it had agreed to pay an additional $4.25 million. The contract price is evidence that Parklea considered the Land to be worth $85.35 million. Parklea was a party to the dishonest concealment of the Occupation Condition by SAP. Parklea became registered proprietor of Almona’s Land in circumstances where Almona was paid $4.25 million less than it would have received if the dishonesty had not occurred. In my view, there is a strong argument that a resulting trust could be imposed upon Parklea in these circumstances, by parity of reasoning with the theft and fraudulent misappropriation cases.

50. However, I accept Parklea’s second submission that the Court should not now make order 6 as sought by Almona, because the claim for that relief was not only not made in the further amended statement of claim, but the issue was not addressed in the evidence or contested in any way at the hearing. Parklea rightly observed that the issue was not mentioned in Almona’s comprehensive submissions, and only arose as a result of observations made by the Court in Almona 1. Those observations were only made, in fact, because the proceedings were conducted on the basis that there would need to be a consideration of some aspects of the relief to be granted, depending upon the nature of Almona’s success, if it succeeded in any respects. It did not follow, however, that the question of what relief should be granted was entirely open and divorced from the issues that had been raised on the pleadings and contested at the hearing.

51. I accept Parklea’s submission that the issue of whether Parklea’s interest in the Land should now be made the subject of a charge, or a partial trust be declared to exist over it, is one that has arisen entirely after the hearing and the delivery of the judgment. Given that reality, it is necessarily a matter for speculation how the proceedings may have been conducted differently by the parties, had Almona claimed the relief now sought from the beginning. I proceed upon the basis that there may be a real practical difference between imposing upon Parklea a personal obligation to pay Almona the amount of $4.25 million plus interest, and making an order that gives Almona a proprietary interest in the Land, whether in the nature of a charge or as beneficiary of a trust. On the findings in Almona 1, PT has an indefeasible interest in the Land under its registered mortgage, which takes priority over any interest in the Land that may be created or declared to exist by order of the Court. There is evidence that suggests that the amount of the debt now secured by the mortgage may be significantly greater than the value of the Land. Any residual proprietary interest in the Land that the Court may declare exists may entitle Almona to seek relief that disturbs the present commercial relationships between the parties who have interests in the Land. That is an issue to which no attention was given at the hearing.

52. Almona neither pleaded a claim for the relief that it now seeks nor did it claim any consequential relief to give effect to any charge or trust that it asked the Court to declare existed. Consequently, the other parties were not given an opportunity to address the consequences of the declaration that Almona now asks the Court to make.

53. Furthermore, on the evidence, SAP and Parklea agreed that the purchase price in the Contract should be subject to the Occupation Condition. That aspect of the transaction was at arm’s length. The inclusion of the Occupation Condition presupposes that the value of the Land in Parklea’s ownership may have been worth $4.25 million less than it otherwise would have been, if Almona had been informed of the Occupation Condition, and Mr Constantine had refused to give vacant possession on completion of the Contract, so that Parklea’s ability to make use of the Land would have been affected by the need to eject Mr Constantine. It is not to the point that the Court, in fact, found in Almona 1 that Mr Constantine would have vacated the Land in order for Almona to receive the additional $4.25 million, if Almona had known of the Occupation Condition. Nor is it conclusive that Parklea did not seriously contest that finding at the hearing, or seek to support a case that the circumstances that gave rise to the inclusion of the Occupation Condition in the Contract was material to the actual value of the Land. It is possible that Parklea would have taken a different approach to its defence of Almona’s claim, had it been informed by the pleadings that Almona was seeking an alternative interest in the Land to the claim that, on the particular grounds alleged in the further amended statement of claim, the PT Mortgage should be unwound and a declaration made that Parklea holds the whole of its estate in the Land on trust for Almona.

54. I accept Parklea’s submission that s 90 of the CPA does not have the effect of empowering or requiring the Court to make orders that are outside the relief sought in the pleadings, in cases where it would be procedurally unfair for the Court to ignore the absence of a pleaded claim. As Beech-Jones J said in Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780 at [23]: “The ‘nature of the case’ [as referred to in s 90] for the purposes of this provision is to be ascertained by reference to the issues that arose”. Further, in Papantoniou v Brown [2015] NSWCA 168, Beazley P (as her Excellency was) and Macfarlan JA agreed with the following statement by at Sackville AJA:

[115] Section 90 of the Civil Procedure Act does not assist the Browns. Section 90 requires the court after trial to give such judgment or make such order as the nature of the case requires. An order is not required by the “nature of the case” if to grant relief would have the effect of denying procedural fairness to one party…

55. For these reasons, I will not make order 6 as sought by Almona on the present state of the pleadings.

Order for an inquiry and an accounting by SAP

56. As has been noted above, Almona’s prayers for relief in its further amended statement of claim included a claim that an order be made for an inquiry and the taking of accounts in respect of the conduct of SAP in the exercise of its mortgagee’s power of sale in respect of the Land.

56. Almona seeks orders in the following terms at this stage of the proceedings:

7.   An order that there be a mortgagee account and inquiry as to whether any monies are due to the plaintiff arising from:

(a)   the second defendant’s calculation and charging of interest under the loan to the plaintiff including the second defendant’s recalculation of interest in the sum of $5,451,829 from the proceeds of sale of the Land;

(b)   the application of the sale proceeds from the sale of the security properties at Glenwood Park and Newcastle West for $2,000,000 and $11,001,000 respectively;

(c)   the proceeds of the operation of the Parklea Markets up to 22 March 2016.

8.   An order that following the inquiry and account the second defendant pay to the plaintiff any amount determined to be owing to the plaintiff.

9.   An order that orders 7 and 8 be stayed pending judgment in any appeal and cross appeal or until further order.

10.   An order that the orders as to the manner in which the account and inquiry occur be deferred until such time as the stay is lifted.

58. SAP is the only defendant with an interest in these orders. SAP accepted that the mortgagee/mortgagor relationship between SAP and Almona contains an obligation to account. However, SAP submitted that an account cannot be ordered within the present proceedings, with the parties constituted as they are, and on the present state of the pleadings and the evidence.

59. As to the pleading issue, SAP submitted in essence that, where there is no issue that the defendant is an accounting party – as is the present case – the plaintiff must plead the material facts which would justify the making of an order for an account at this time. Primarily, SAP complained that it has not been pleaded that proper accounts have not been provided.

60. SAP additionally submitted that there is a particular complication in the present case, in that the receivers appointed by SAP were responsible for the matters the subject of the accounting in order 7(b) and 7(c) set out above.

61. The immediate question is whether the Court should now make orders 7 and 8, in circumstances where the effect of orders 9 and 10 will be that the determination of the manner in which the accounts will be taken, and the taking of the accounts, will be deferred until after the determination of any appeals and cross appeals.

62. As SAP accepts that it is an accounting party, Almona may have a right to the taking of accounts, provided it establishes any relevant preconditions, irrespective of the outcome of the appeals and cross appeals. As a mortgagor, Almona may simply have a right to the provision of proper accounts. I accept that Almona has made a decision that it is in its best interests nonetheless to defer the substantive questions concerning the taking of accounts until the appellate process has concluded. But if there is a deferral, that justifies the Court in being cautious about the making of orders 7 and 8 now. There will be enough issues for the Court of Appeal to deal with without this Court creating more issues by the premature making of orders 7 and 8, on a basis that may properly be open to challenge by SAP. In these circumstances, I am not minded to create appeal points by taking any risk that Almona has not yet lay down a proper foundation for the making of orders for an accounting by SAP.

63. In its submissions, SAP relied upon the recent decision of the Court of Appeal of the Supreme Court of Western Australia in Rowe v National Australia Bank Ltd [2019] WASCA 140. The decision of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135] requires that I do not depart from the decision of the Court of Appeal, even though it concerns a question of non-statutory law, unless I am convinced that the interpretation of the law set out in the decision is plainly wrong. Not only do I not think that the decision is plainly wrong, but I respectfully agree with it. In particular, the manner in which the members of the Court of Appeal approached the question of what a plaintiff must do to establish a right to an order for accounts in a practical manner.

64. Murphy JA and Sofronoff AJA, with whom Quinlan CJ agreed, said at [87] that “…a plaintiff seeking an account must plead (1) the relationship or circumstances by which it is alleged that the defendant is an accounting party, and (2) the material facts which would justify the making of an order for an account at that particular time”. In the present case, there is no issue with requirement (1). As their Honours said at [89], it is not necessary for the plaintiff seeking an account to “plead that upon the taking of the account, a credit sum will necessarily be found to be due to, or that a balance will be owing in favour of, the plaintiff”. A plaintiff seeking an account “may often not know whether that will be the case or not”. Their Honours concluded on this subject: “Each case will depend upon its own circumstances, and ultimately the matters to be pleaded (and proved) will depend upon the basis upon which it is alleged that the defendant is an accounting party and the events which have happened leading to the claim for relief”. See also the judgment of Quinlan CJ at [3]-[7], particularly the observation at [5] and [6] that, notwithstanding that there is no rigid rule that a party calling for an account must establish an entitlement to some amount, “this does not mean that the discretion to order an account is at large. It is necessary, in every case, that there be material facts that would justify the order for an account…”

65. The mortgagee is generally entitled to the costs of undertaking the accounting, at least where it is not established that the mortgagee has breached its duty of good faith in respect of the matters the subject of the account: see Almona 1 at [513]. The costs of the accounting will be secured by the mortgage in that case. In the present case, the value of SAP’s mortgage has been exhausted by the sale of the Land. As Young AJA (as his Honour then was) said in Riva NSW Pty Ltd v Key Nominees Pty Ltd [2014] NSWSC 301 at [22], “an account is often refused if the mortgagee is [sic] not put in funds to prepare it”.

66. In its written submissions dated 8 April 2020, Almona identified, at par 37, aspects of the evidence that concerned the three subject matters for the accounting listed in proposed order 7, as set out above.

67. As for the recalculation of interest by SAP, whereby, a considerable time after the completion of the contract for the sale of the Land, it apparently recalculated the interest that was owed to it, and then retained an additional $5,451,829 from the purchase price, I recall that that issue was raised during the course of the hearing. It is mentioned in Almona 1 at [305]. Almona’s submissions referred to the court book, volume 2 pages 608-611, 630-641 and 642. If I understand Almona’s references correctly, pages 608-611 form part of the amended Contract, with the reference to the higher price of $85.35 million removed. Pages 630-631 are part of the mortgage granted by Parklea to PT. Page 642 is a covering letter to the Registrar General dealing with registration of the mortgage. It may be that Almona’s description of the evidence relied upon was intended to refer to some other aspect of the evidence than Almona’s court book.

68. In any event, to the extent of my recollection, there was no inquiry at the hearing into the circumstances in which SAP retained the additional amount of interest at all. There was no investigation as to whether, or not, SAP provided a reconciliation of its interest re-calculation to Almona, and whether, or not, there was reason to consider any proof provided by SAP of its right to retain the additional interest was inadequate.

69. As to the fate of the proceeds of sale of the other security properties at Glenwood Park and Newcastle West, the fact of those sales was noted in Almona 1 at [74]. Mr Constantine said, in par 10 of his 11 January 2019 affidavit, that the Glenwood Park property was sold by the receivers for $2 million on about 4 October 2016 and: “I was not informed of how those monies had been applied to the amounts owing by Almona but assumed they were offset against the loan”. Mr Constantine had already dealt with the sale of the Newcastle West property for $11,001,000 in par 9. He did not make a similar statement about that property, to the effect that he was not informed of how those monies had been applied.

70. The position concerning whether the receivers or SAP provided any accounting to Almona in relation to each sale, and if so whether that accounting was adequate, is unclear. It may be that the receivers, in the first instance, were required to provide Almona with a proper accounting concerning the disposition of the net proceeds of sale, after providing for all costs. I assume that would include notification of the time and amounts of payments made to SAP. SAP would then have to account for the receipts from the receivers in respect of the reduction in the amount of the debt and the consequent effect on the calculation of interest.

71. In relation to its entitlement to an accounting in respect of the proceeds of the operation of the Parklea Market, Almona relied upon the statement in the advertising material prepared by Colliers: “Strong diverse net passing income of $4,105,003 pa”. It would be expected that Almona, as the mortgagor of the Land, would be entitled to a full accounting from its agents, the receivers, in respect of the operation of the Parklea Market during the period of the receivership, up to the date of the completion of the Contract. However, as I understand the evidence, Almona would not be entitled to that accounting from SAP.

72. While the evidence at the hearing did not focus on the issue, my understanding is that, even though SAP elected to enter into the Contract as mortgagee in possession, it did not operate the Parklea Market as mortgagee in possession. The significance of this limited exercise by SAP of its mortgagee’s right to act as mortgagee in possession of the Land was not explored at the hearing.

73. At the least, it seems likely that the receivers, rather than SAP, will be the proper accounting party to Almona in respect of the operation of the Parklea Market. Although the receivers clearly reported to SAP, it is not established that the receivers provided SAP with all of the accounting documents that would be required, if SAP were to be ordered to provide a formal accounting to Almona in respect of the operation of the Parklea Market.

74. It would be surprising if SAP has not already prepared complete accounts in some conventional commercial form in respect of the debt owed to it by Almona, in relation to repayments of capital and the accrual and payment of accrued interest. The same should be true as between the receivers and SAP in relation to the determination of the net proceeds of sale of the Glenwood Park and Newcastle West properties, and the application of those proceeds to repayment of the debt. Finally, it would be expected that the receivers could not have operated the Parklea Market in a professional manner without preparing detailed accounts. If any professional accounts were prepared in respect of these issues, it is not clear on the evidence whether they have been demanded by Almona, and if so, whether they have been provided. It is possible that any accounts prepared to conform to modern accounting standards will not be in a form that will facilitate the conventional taking of accounts in court, involving as that does a process of surcharging and falsifying.

75. However, given the unresolved question of the source of payment of the costs of the accounting process, it is pertinent for the Court to require that the parties give some attention to whether adequate accounts exist in some form, and if so, whether they are in any respects inadequate. As with all matters, the Court’s attention must be directed to the just, quick and cheap resolution of any real issues in dispute.

76. That is not to say that Almona may not be able to demonstrate a right to a formal accounting process. However, I do not consider that it has demonstrated that right as yet.

77. If Almona wishes to pursue this issue before all appeals and cross appeals have been determined, it will be necessary for Almona to properly address the question of whether the receivers must be made parties to the proceedings as proper accounting parties. For the present I will leave open the question of whether Almona should be required to institute new proceedings to which the receivers may be joined.

78. I will therefore not make orders 7 to 10 at this stage. Almona should have an order giving it leave to revive the question of the inquiry and account when it sees fit, upon proper notice being given.

Dismissal of claims

79. The result of Almona 1 is that the Court should make orders dismissing the prayers for relief in respect of which Almona failed. At an earlier time, this exercise was complicated by the appearance that Almona wished both to pursue an accounting by SAP as mortgagee and an inquiry into the damages suffered by Almona, as a result of the various breaches of duty alleged by it. It appeared necessary for the Court to avoid unintended consequences that might flow from the dismissal of claims for declarations of right that may have underpinned future steps in the proceedings.

80. Almona has now adopted a more simple approach, which in part may be connected with its abandonment of its claim for declarations as to the existence of breaches by the defendants, as well as of its application for an inquiry into any further damages that it may have suffered. Be that as it may, Almona now proposes that the Court make the following orders:

11.   Order that the balance of the plaintiff’s claim for relief be dismissed.

12.   Order that the plaintiff’s claims against the third defendant be dismissed.

81. The structure of Almona’s proposed short minutes of order suggests that order 11 is directed at Almona’s claims against Parklea and SAP.

82. The equivalent orders proposed by Parklea and SAP are:

13.   Reserve determination of prayer for relief 3(f) of the Further Amended Statement of Claim.

14.   Dismiss the plaintiff’s claims as made in prayer A, B, 1, 2, 3(a) to (e) and (g), 3A, 4, 5, 6, 6A, 7, 8, 9, 9A and 10 of the Further Amended Statement of Claim.

15.   Note that accordingly the plaintiff’s claims against the third defendant are dismissed.

83. PT’s only direct interest in the form of orders was that an order be made dismissing Altona’s claim against it, and that a proper order be made in respect of the payment of its costs.

84. The practical effect of the competing proposed orders concerning the dismissal of Almona’s prayers for relief appears to be the same, except Parklea and SAP would reserve Almona’s claim in prayer 3(f) for an inquiry into and that an account be taken of “the costs of the receivers in relation to their appointment over the Land incurred after the notional completion date”.

85. Parklea does not have a direct interest in prayer 3(f), but it noted in its submissions that Almona still seeks an account as between mortgagor and mortgagee, and it may be that the inquiry envisaged by prayer 3(f) may be relevant to that relief and, as a matter of prudence, the prayer ought not be dismissed at this stage.

86. Almona’s only response, in par 3 of its 21 April 2020 submissions in reply to Parklea’s 16 April 2020 submissions, was to observe that Almona’s submissions had provided for the balance of the proceedings to be dismissed “reserving leave to make any further application for lump sum orders or for costs orders against third parties once the Court has determined the threshold issue as to which party should pay which other party”.

87. Almona’s proposed short minutes of order do not include an order making this reservation. I am not opposed to the reservation being made, so Almona should ensure that the draft short minutes of order to give effect to these reasons include an order to that effect.

88. It is not clear why the parties, at this stage, agree that prayers 1 and 2 of the further amended statement of claim should be dismissed. Those prayers underpin extant interlocutory orders extending the caveat referred to in prayer 1, and undertakings given by the defendants concerning certain dispositions in respect of the Land. The interlocutory extension of the caveat was made and the undertakings were continued as recently as 14 April 2020. The prayers relevant to that relief should remain in the further amended statement of claim for the present.

89. As I have declined Almona’s application to make proposed orders 7 to 10, at this stage it would be premature to dismiss prayer 3 in its totality. However, a comparison between the proposed order 7 and prayer 3 shows that the three subjects that Almona now seeks be the subject of a mortgagee’s inquiry and accounting are different from the subjects listed in prayer 3. Strictly, Almona should amend prayer 3 and consequently make appropriate amendments to the pleading and particulars.

90. It unfortunately remains the case that it is difficult to formulate a general order that dismisses the balance of Almona’s claims against Parklea and SAP. The manner in which the prayers for relief in the further amended statement of claim had been drawn has, as recent experience demonstrates, made it difficult to formulate in a safe manner an order that dismisses residual prayers for relief on a piecemeal basis. I do not see the need for the making of such an order at this stage. If an order is to be made dismissing remaining claims, the making of that order should be deferred until the Court has finally determined all of the prayers for relief that are pursued by Almona.

91. Consequently, I am disinclined to make orders 11, 13 and 14 at this stage of the proceedings.

92. All parties now accept that Almona’s claims against PT should be dismissed. I will therefore make order 12.

Orders for costs

93. The parties proposed fundamentally different costs orders that were appropriate for the Court to make on the basis of the outcome of Almona 1.

94. The costs orders proposed by Almona are:

16.   Order that the first and second defendants pay the plaintiff’s costs of the proceedings.

17.   Order that the first and second defendants pay the third defendant’s costs.

95. There is no dispute that PT is entitled to an order that its costs be paid. The only issue is as to who should be ordered to pay those costs.

96. Almona sought order 17 by notice of motion dated 7 April 2020. An order of this type is generally called a Sanderson order, by reference to the principle in Sanderson v Blythe Theatre Co [1903] 2 KB 533. I will deal with Almona’s claim for this order as a separate subject below.

97. The defendants joined in proposing that the Court make the following orders as to costs:

18.   Order that the plaintiff pay 80% of the costs of the first defendant as agreed or assessed forthwith [or alternatively, that the plaintiff pay the costs of the first defendant in the sum of $1,162,710.86 forthwith] plus interest on costs as and from the date on which each of the costs were paid by or on behalf of the first defendant.

19.   Order that the plaintiff pay 80% of the costs of the second defendant as agreed or assessed forthwith [or alternatively, that the plaintiff pay the costs of the second defendant in the sum of $1,168,307.50 forthwith] plus interest on costs as and from the date on which each of the costs were paid by or on behalf of the second defendant.

20.   Order that the plaintiff pay the costs of the third defendant as agreed or assessed forthwith [or alternatively, that the plaintiff pay the costs of the third defendant in the sum of $315,000 forthwith] plus interest on costs as and from the date on which each of the costs were paid by on behalf of the third defendant.

21.   The plaintiff pay the first, second and third defendants’ costs of their notices of motion on costs filed 3 April 2020, 3 April 2020, and 8 April 2020 respectively.

98. By the notices of motion referred to in order 21, the defendants respectively sought orders 18 to 20.

99. The notices of motion also sought interest on the costs paid by the defendants. As I understand Almona’s submissions, it does not contest that, if it is ordered to pay any part of the defendants’ costs, it should also be ordered to pay interest in respect of the costs that have been paid.

100. Finally, the defendants sought orders for the release to them of the amounts paid by Almona as security for costs. I will deal with this issue separately below.

101. Almona's response to the gross sum costs applications was to submit that the Court should first decide the costs orders that should be made. Then, if any costs orders were made in favour of Parklea and SAP, Almona requested time to serve evidence and further submissions on the gross sum costs issue. Almona's position is the same in respect of PT's application, as it has not yet had time to respond to PT's evidence.

102. As the defendants' notice of motions were filed shortly before the 9 April 2020 hearing, I will not deal with the defendants' applications for gross sum costs orders in these reasons, and I will give Almona the time it seeks to respond if that is necessary.

103. It will be appropriate to note at the outset the total amount of the costs incurred by the parties in these proceedings, as disclosed in their solicitors' affidavits. Those costs are set out in the following table:

Party	Solicitors	Counsel	Disbursements	Total
Almona	$1,127,743.75	$1,303,690.07	$2,431,433.82
Parklea	$768,406.10	$601,709.16	$49,785.33	$1,426,118.31
SAP	$1,077,664	$480,080	$52,928.79	$1,610,672.79
PT	$291,598	$114,217.50	$22,470.10	$428,285.60
Total	$5,896,510.32

104. The figures for SAP and PT omit small amounts of work in progress up to the dates of the solicitor's affidavits, and will not include costs incurred after those dates. The amount of solicitors' costs for Almona includes disbursements.

105. If the Court makes the costs orders sought by Almona, Parklea and SAP will be required to pay the proportion of about $2,431,433.82 that Almona may be able to sustain on an assessment of its costs. Those defendants would be required to bear their own costs of about $3,036,791.10 between them.

106. If the gross sum costs orders sought by Parklea and SAP are ultimately made, Almona will be required to pay those defendants a total of $2,331,018.36 (being the total of the amounts specified in orders 18 and 19) and bear its own costs of $2,431,433.82.

107. Additionally, if the gross sum costs order sought by PT is ultimately made, either Almona, or Parklea and SAP between them, will be required to pay PT $315,000.

108. These substantial amounts stand in comparison to the fact that, after the Court received a substantial amount of evidence at the hearing, which took place over seven full hearing days, and after determining the reasons for judgment in Almona 1, the positive outcome was an order that Parklea and SAP pay a total amount of $5,171,660.57 to Almona. The Court is thus required to determine the costs orders that should be made in these proceedings, when those costs in aggregate involve amounts comparable to the amount of the judgment in the proceedings, but to do so on a relatively rudimentary basis.

Legal principles

109. The court's power to award costs is governed by s 98(1) of the CPA, which provides:

(1)   Subject to rules of court and to this or any other Act—

(a)   costs are in the discretion of the court, and

(b)   the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)   the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

110. The following observations by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22] describe the manner in which the Court should exercise its discretion to award costs. Their Honours said, in respect of the precursor to s 98, at [22] (footnotes omitted):

The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as “the subject matter and the scope and purpose” of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be “definitely extraneous to any objects the legislature could have had in view”.

111. McHugh J (although in dissent in the outcome) added at [65] that "the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation". His Honour referred to the gradual development by the law of principles to guide the proper exercise of the discretion.

112. One of those principles is found in Uniform Civil Procedure Rules 2005 (NSW) r 42.1, which provides:

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

113. This rule gives rise to two questions: first, what is the event; and secondly, do the circumstances require some other order than that the costs follow the event?

114. To adopt the proposition stated in G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths) (Dal Pont) at [6.15]: "… The central and overriding principle is that of doing justice to the parties in each particular case, it being judicially remarked that there is 'no better test than the test of what is fair and just between the parties’". See also Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5].

115. In the present case, all parties other than PT succeeded and failed on different causes of action and issues raised in the proceedings.

116. Where there are multiple issues in a case, generally the Court does not attempt to differentiate between the issues on which the successful party succeeded and failed. Ordinarily, the successful party will be awarded its costs without the Court attempting to differentiate between the particular issues on which it succeeded and those on which it failed: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 (Elite) at [6]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38]; and Chen v Chan (No 2) [2009] VSCA 233 (Chen) at [10(1)].

117. However, there is no rule to this effect that governs the proper exercise of the Court's discretion, and the approach that the Court should adopt depends upon the circumstances of the particular case, viewed against the wide discretionary powers of the Court: see Elite at [8]; Bostik at [38] and Chen at [10(2)]. As was said in the last-mentioned case, "…the Court is entitled to examine the realities of the case and will attempt to do 'substantial justice' as between the parties on the matter of costs".

118. Where the court determines that substantial justice between the parties requires the making of an order that apportions costs "then it does so primarily as 'a matter of impression and evaluation', rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter": see Chen at [10(5)].

119. The value, in money terms, of the issues upon which the parties succeed and fail generally carry little weight per se in the process of apportionment: Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173 (Gujarat) at [14], [15]. That is because the costs of the parties in litigating particular issues are not necessarily proportional to the value in money terms of the issues.

120. In complex cases, to avoid difficult and expensive assessments of costs, it is often appropriate to make a fractional order in respect of the total of the costs incurred by a successful party on an issue, where the court has decided that it is appropriate to treat the costs of a particular issue differentially: see Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558; [2002] NSWCA 237 (Butcher) at [95]. It is not usually appropriate, and it is often not possible, for the Court to engage in a minute analysis of the evidence bearing upon issues for which particular parties have succeeded and failed.

121. The Court does not usually differentiate between issues on which a successful party has succeeded and those on which it has failed "unless a particular issue or group of issues is clearly dominant or separable": see James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (Surf Road) at [34]; Elite at [6]; and Bostik at [38]. Separable issues are not restricted to separate claims, such as causes of action, but may relate to any disputed question of fact or law before a court on which a party succeeds or fails.

122. Apart from the fundamental difference that exists between Almona on the one hand, and Parklea and SAP on the other, as to whether the only relevant 'event' in the proceedings was Almona's success in achieving an award of damages for $4.25 million plus interest, those parties were at issue as to how the Court should apportion the costs of the parties, if it either found that there was more than one 'event', or that it concluded that some other order was appropriate than that costs should follow the 'event' as contended for by Almona.

123. Almona submitted, in reliance on a number of decisions of intermediate courts of appeal, that there was a practice that the appropriate course was simply to reduce the costs ordered to be paid to the successful party by an appropriate proportion, and then to leave the unsuccessful party to bear its own costs.

124. In Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306, Beazley, Ipp and Tobias JJA said:

[24] … In the case where there are multiple issues litigated, the court may, in the exercise of its discretion, order that a successful party have part only of its costs. However, it does not necessarily follow that that is the appropriate order. The commencing position is that costs follow the event so that a successful party is entitled to costs. It may be appropriate to order that a successful party be deprived of costs or a portion of the costs if the matters upon which that party is unsuccessful took up a significant part of the trial, either by way of evidence or argument. This proposition is well established and does not require any discussion of the caselaw, which is conveniently contained in the annotations to r 42.1 in Ritchie’s Uniform Civil Procedure (NSW): paras 42.1.5; 42.1.10; 42.1.15.

125. This proposition was restated in Elite at [7], Bostik at [38], and Chen at [10 (3)].

126. It may be accepted that the Court of Appeal in Sabah, Elite and Bostik expressed the practice as if it was the one to be followed in cases where it was thought fit to deprive the successful party of the whole of its costs; although in Chen, the Victorian Court of Appeal prefaced the statement of the practice with the word "generally".

127. Parklea and SAP responded to this submission by relying upon authorities in which the courts appear to have recognised that the successful party should have part of its costs, but the overall position as to costs should be determined on the basis that the successful party should pay some part of the unsuccessful party's costs, by reference to the issues upon which the successful party failed: see Butcher at [94], Surf Road at [33] and Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 724 per Brereton J (as his Honour then was) at [10]. It should be noted, in relation to Butcher, that the case may be exceptional, as the issue upon which the successful party failed was an allegation of fraud, and Handley JA referred at [92] to a rule of practice that, in such a case, a party whose claim of fraud fails should pay the other party’s costs.

128. I would add that in James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No 2) [2015] NSWSC 970 (James), McDougall J made costs orders that required the defendants to pay the costs of one of the plaintiffs of issues on which that plaintiff had succeeded, but ordered that plaintiff to pay the defendants’ costs of a claim raised by the plaintiff that failed. His Honour noted at [72] that, as to the different claims raised by the relevant plaintiff: “They were cumulative claims, rather than alternative claims aimed at recovering the one amount of damages”. His Honour continued:

[73] The claims were not entirely separate and distinct, because some of the evidence was capable of application to both. Nonetheless, in my view, this case stands outside the ordinary run of cases. I do not think that anything further is needed to trigger consideration of what, in the facts of this case, the interests of justice require by way of costs order.

129. After considering the circumstances of the case before him, McDougall J reached the following conclusion:

[108] In those circumstances, simply to order that Mr James receive only a stated percentage of his costs would not do complete justice to the defendants. First, it would not compensate them for their own outlay on this part of the case. Second, it would not reflect that they had succeeded on the very question of fact that Mr James had declined to admit. Thus, in my view, one way of doing substantial justice, but doing it by way of apportionment rather than assessment, would be to give Mr James significantly less than that stated percentage of his overall costs.

130. The authorities do not sustain Almona’s submission that the Court always applies a practice that, where a plaintiff achieves substantial success but fails on a number of issues, the proper costs order is always to reduce the costs payable by the defendant to the plaintiff by an appropriate proportion, and to leave the defendant to bear its own costs.

131. Of course, it is usual to order that the costs orders made in favour of the different parties may be set off against each other, as McDougall J did in James. The net result of this process may be that, at the end of the day, only one of the parties actually receives a proportion of the costs incurred by that party.

132. I consider that the following extracts on this subject from Dal Pont accurately capture the nuances of this difficult area of practice (footnotes omitted).

133. The first extract is of assistance in the determination of what is meant by the ‘event’:

[8.4] Consistent with the foregoing, authority supports the proposition that, pursuant to the ‘rule’ that ‘costs follow the event’, ‘prima facie the costs of the proceedings should follow the verdicts on the issues’. Costs may therefore be awarded in the same manner as if separate actions had been brought in respect of each cause of action or issue. So a party may be entitled to the costs of an issue on which he or she has succeeded, even though the general costs of the cause may follow the judgment. Indeed, it has been judicially remarked that ‘[t]he days when a plaintiff could, with impunity, mount an attack on several fronts, some with little prospect of victory, in the hope of a direct hit and the recovery of all costs must be put behind us’.

134. The learned author then considers the problems involved in dealing with the relative success of parties who fail and succeed on different issues in the following terms:

[8.5] In giving effect to the relative success of each party on the various issues between them, a court may opt to tally the ‘wins and losses’ on issues, and make an award of costs both for and against each party to this end. This may be realistic if a party has simply failed or succeeded on one or more severable issues…

Yet outside of the discrete or several issue scenario, such an approach has an air of potential artificiality – which explains at least in part why many judges have expressed reticence to do so – and is unlikely to be conducive to simplicity in framing a costs order…

The more usual approach, described as ‘a pragmatic approach’, is to order a proportion of costs in favour of one of the parties (or, if the court finds the issues are evenly balanced, make no order as to costs). Although imprecise, an intelligently made apportionment of costs may generate an outcome no less fair than an issue-by-issue approach. Yet judicial reticence to pursue an issue-by-issue costs allocation cannot be a cloak for injustice; as fairness underscores costs orders, if an issue-by-issue approach will produce a result that is fairer than an alternative, it will be applied.

[8.6] This does not, however, address whether a party who has failed on an issue should, in accordance with the general costs rule, be ordered to pay the costs of his or her opponent on that issue, or merely be deprived of his or her own costs in respect of it (thus leaving the opponent to bear his or her own costs on that issue). Again the matter is governed by the court’s discretion, its exercise directed to ensuring, as much as possible, that the outcome accords with the justice of the case. Yet, at least where the party who proves ultimately successful neither improperly nor unreasonably raised the issues nor made the allegations on which he or she has failed, he or she will not, as a general rule, be ordered to pay any part of the unsuccessful party’s costs. Similarly, as a general principle and starting point, ‘an applicant who relies on different legal rules in pursuit of a single outcome, and who achieves that outcome, should not have his or her entitlement to costs qualified by reference to the rules under which his or her case was not successful’…

Determination of the event or events

135. The essence of Almona’s position was that the relevant event was its success in obtaining a judgment for damages for $4.25 million plus interest, and there is no reason why the Court should not order that Parklea and SAP pay all of its costs on the ordinary basis.

136. Parklea and SAP, on the other hand, submitted that it is unrealistic to treat the event as being Almona’s success on the damages claim. Almona’s real purpose in prosecuting the proceedings was to obtain an order that had the effect of reinstating it as the registered proprietor of the Land, free of the PT Mortgages, and only subject to the mortgage that it had granted to SAP to secure the debt owed as at 22 March 2016. Almona failed completely on this claim.

137. Acknowledging that Almona succeeded on the issues relating to its damages claim, Parklea submitted that “the trial was overwhelmingly taken up with issues on which the plaintiff was unsuccessful, both by way of evidence and argument”, and that the “plaintiff’s claim for damages or monetary compensation with respect to the “Occupation Condition” was a subsidiary and entirely marginal aspect of the plaintiff’s claim”.

138. To similar effect, SAP submitted that it, rather than Almona, was the successful party in the litigation. As Almona had failed to achieve reinstatement as the registered proprietor of the Land, according to SAP’s submissions, Almona had “been denied its ‘prize’”.

139. SAP relied upon the English Court of Appeal decisions of Roache v News Group Newspapers Ltd [1990] TLR 551 and Perry v Stopher (1959) 1 WLR 415 at 426 for the proposition that a plaintiff who achieves some success in litigation may not in substance be the successful party where, as stated in the first of these authorities, “the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win”.

140. I reject Almona’s submission that its success in its damages claim represents the only ‘event’ in these proceedings. That would be an unfair way to categorise the proceedings, and would distort the reality of the manner in which they were contested by the parties. The fact that a plaintiff is successful to some degree does not require that the ‘event’ is the issue on which the plaintiff has succeeded. In principle, the success by a defendant in defeating a claim may have as much a call on being treated as the ‘event’ as the plaintiff’s success on a claim.

225. I am mindful that I should not discount completely the approach that is usually adopted, whereby the Court does not readily deny costs to the successful party by minutely discounting for forensic issues on which that party has failed. A balanced approach requires that it be borne in mind that Almona did succeed in obtaining a substantial judgment in its favour. I acknowledge that there is scope for legitimate argument about the relative justification or need for various aspects of the historical evidence for the purposes of Almona's Occupation Condition claim. For example, the detail of the evidence concerning the Proposed Transaction probably had little bearing on the Occupation Condition claim, even if technically relevant as background. However, as it appeared to the Court, the case concerning the Proposed Transaction was conducted on the basis of relatively few documents.

226. This is not a case where the two events arose out of entirely separate and discrete claims. On the contrary, a substantial proportion of the evidence and forensic effort had real relevance to both claims.

227. However, in the special circumstances of these proceedings, it would be unfair for the Court to order either Almona, or Parklea and SAP, to pay all, or substantially all, of the costs incurred by the other or others.

228. The Court is required to make its assessment knowing that the circumstances in which the majority of the costs were incurred by the parties are not visible to the Court, and there is no objective or rational basis for the Court to allocate the invisible costs to a particular event to the exclusion of the other one.

229. Further, it is simply not realistic for the Court to attempt to make fine-grained judgments that attribute particular observable forensic efforts towards one or other event. Consequently, I do not think it would be rational for the Court to try to justify an outcome whereby, say, 25% of one party’s costs were ordered to be paid by another party or parties.

230. The circumstances have caused me to conclude that the proper order to be made in this case, on the basis that it is fair and just, as between Almona on the one hand and Parklea and SAP on the other, is that the Court should not make an order for the payment of costs, on the basis that the parties should bear their own costs.

A possible alternative approach

234. The orthodox approach would be for the Court to proceed upon the basis that Almona, Parklea and SAP have made their submissions as to the costs orders that should be made as between them, the Court has reserved judgment and indicated by these reasons how it would decide the issue, so that it should now simply make orders on that basis.

235. However, as I have attempted to explain above, a substantial part, and probably the most part, of the 'litigious effort' is invisible to me, and I have serious qualms about my ability, in that circumstance, to be able to determine fair and just costs orders as a matter of impression employing a broad brush approach.

236. I will therefore be prepared to entertain submissions from Almona, Parklea and SAP, before I make a formal order that there be no order is as to costs between those parties, that the Court should permit some other process for the determination of the costs orders that should be made to the one that the Court has been forced to adopt. The Court may be persuaded that it is now obliged simply to make costs orders that conform to these reasons, but I consider that fairness justifies the Court in giving the interested parties an opportunity to make submissions on the issue.

237. My present view is that the only practicable alternative approach would be for the Court to appoint an appropriately qualified referee, who would be empowered to deal with the costs issues relatively informally, having regard to the reasons for judgment in Almona 1, and such evidence and submissions as the referee determines should be received from the parties. The referee could also deal with the issue from the perspective of a costs assessor, and if appropriate make gross sum costs orders.

238. As at present advised, I would be unwilling to undertake that exercise myself, for much the same reasons as McDougall J was unwilling to do so in James. In any case, as the heart of the problem that I have experienced is the invisibility of much of the parties' 'litigious effort', any further investigation of the question of the proper costs orders to be made could be undertaken as well by a referee as by the Court.

239. I appreciate that there will be cost benefit considerations for the parties in respect of this alternative course for determining the costs orders.

240. My associate should be informed within seven days whether any of Almona, Parklea and SAP wish to pursue the alternative approach that I am prepared to leave open in principle. If that happens, my associate will advise the parties as to the course to be followed.

241. In any event, Court must make all of the substantive orders that can now be made, so that any party who wishes to do so may lodge an appeal against the making of those orders.

Claim for a Sanderson order

242. If the Sanderson order sought by Almona is made, then Parklea and SAP will be ordered to pay PT’s costs of the proceedings.

243. An order of this type should be compared with a Bullock order, which has the effect that the plaintiff is ordered to pay the costs of a successful defendant, but the unsuccessful defendant is ordered to pay the plaintiff’s costs, including the amount of the costs that the plaintiff must pay to the successful defendant: see Bullock v London General Omnibus Co [1907] 1 KB 264 at 272.

244. The practical difference between the two types of order is that, where a Bullock order is made, the successful defendant is able to recover its costs from the unsuccessful plaintiff, and it is a matter for the plaintiff whether it can recover those costs from the unsuccessful defendant. Where a Sanderson order is made, the successful defendant cannot look to the unsuccessful plaintiff, but is dependent for the receipt of its costs upon the solvency of the unsuccessful defendant.

245. The two different orders distribute the risk that the successful defendant will not be able to recover its costs differently, and the Sanderson order frees the plaintiff of the burden of the successful defendant’s costs, even though the plaintiff elected to sue that defendant and failed.

246. The making of the Sanderson order sought by Almona would have significance in the present case, as it was put to the Court that both Parklea and SAP are special purpose vehicles whose financial position is in each case dubious. I will return to this issue below.

247. Almona correctly relied upon the following authorities as establishing the principles that govern the making of Bullock and Sanderson orders.

248. In Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75 at 229-230, Gibbs CJ said (footnotes omitted):

In my respectful opinion, however, the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution.

The ground on which a Bullock order may be made is, in my opinion, more accurately stated in a passage in Sanderson v. Blyth Theatre Co., which was cited with approval in Bullock v. London General Omnibus Co. and Hong v. A. & R. Brown, viz., that the costs which the plaintiff has been ordered to pay to the defendant who succeeded, and which the plaintiff recovers from the defendant who has failed “are ordered to be paid by the unsuccessful defendant, on the ground that … those costs have been reasonably and properly incurred by the plaintiff as between him and the [unsuccessful] defendant”. In Johnsons Tyne Foundry Pty. Ltd. v. Maffra Corporation, Williams J. stated the principle in a similar way and Starke and Dixon JJ., in giving their reasons for making a Bullock order, both relied on the circumstance that the attitude adopted by the successful defendant had induced the plaintiff to join the other defendant. In my respectful opinion the true position was clearly stated by Blackburn C.J. in Steppke v. National Capital Development Commission, when he said that “there is a condition for the making of a Bullock order, in addition to the question whether the suing of the successful defendant was reasonable, namely that the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant”.

249. Secondly, Almona relied upon the authority of Mason P, with whom Stein and Heydon JJA agreed, in Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179 (Gibson):

[128] Judge Curtis referred to the leading cases on Bullock and Sanderson orders (GBk 7-11). One of them was the decision of Asche CJ in Lackersteen v Jones (No 2) (1988) 93 FLR 442 which contained the following summary at 449:

1. It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.

2. The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.

3. While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.

4. Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.

250. It is therefore necessary to identify the conduct of Parklea and SAP that makes it fair to impose the liability for payment of PT’s costs upon them. In its submissions, Almona identified that conduct as those defendants’ fraud in connection with the transfer of title to the Property to Parklea at a sum not reflective of its true value by $4.25 million, and the corresponding registration of PT as the holder of the PT Mortgages.

251. Almona also relied upon an argument based upon the entitlement of PT under the PT Mortgages to be indemnified by Parklea for any costs connected with the mortgages.

252. As to the first of the arguments, Almona sought to bolster its position with the submission that Parklea and SAP were fully aware of all of the facts and circumstances that led to the finding that they were dishonest in relation to the Occupation Condition, but they withheld those facts from Almona.

253. Almona submitted that it was reasonable for it to have joined PT as a party and sought the orders against PT that it did. That was because PT holds registered mortgages over the Land in which Almona claimed it held a proprietary interest.

254. Almona submitted that the claim against PT “fell away”, because the Court in Almona 1 found that, although the conduct of Parklea and SAP was fraudulent and dishonest in relation to the Occupation Condition, it held that this conduct did not cause Parklea to become the registered proprietor of the Land. It submitted that, but for the participation of Parklea in the fraudulent conduct of SAP and the registration of the PT Mortgages, no claim would have been brought against PT.

255. Almona’s second argument in support of the making of a Sanderson order was that the effect of clause 16.1(b) of the Loan Note Subscription Agreement of 22 March 2016 was that Parklea agreed to reimburse PT for its costs in “preserving rights”. Almona submitted that, as Parklea is obliged to indemnify PT in respect of its costs of these proceedings, as Parklea has been found to have been a party to SAP’s dishonesty in relation to the Occupation Condition, the effect of making an order that Almona pay PT’s costs would be for equity to assist a party who has been found to have unclean hands.

256. Parklea supported the submissions made by PT as to why it was not appropriate for the Court to make a Sanderson order in respect of PT’s costs.

257. SAP’s first submission in opposition to the making of a Sanderson order was that, in fact, there is no “unsuccessful” defendant in this case against whom a Sanderson order could be made. That submission reflects the argument put by SAP, in respect of the costs order that should be made, that in substance it should be treated as a successful defendant.

258. For the reasons that I have given above, when dealing with the issue of costs, I have rejected the argument that Parklea and SAP should be treated as if they were successful defendants, even if only in proportion to 80% of the costs they incurred.

259. Secondly, SAP submitted that PT’s joinder to the proceedings was not connected to or dependent upon the claim made by Almona against SAP. The basis of this submission was that PT’s joinder could only be connected to Almona’s case against Parklea, but not SAP, because it was only Parklea that became registered proprietor of the Land, and then granted the PT Mortgages to PT.

260. I am not persuaded by this argument because I do not accept that the principles that require that a plaintiff has acted reasonably in joining the successful defendant, and the Court must be able to find something in the conduct of the unsuccessful defendant that makes it fair to order that defendant to pay the successful defendant’s costs, are so narrow as to require the plaintiff’s claim against the successful defendant to have a direct causal relationship with the claim against the unsuccessful defendant. If the requirements that justified the making of a Sanderson order were otherwise satisfied in this case, the fact that SAP was the primary party in default in respect of the Occupation Condition, and Parklea’s conduct leading to the granting of the PT Mortgages was only ancillary to SAP’s conduct, could justify the making of a Sanderson order against SAP. The principle set out by Mason P in Gibson, in par 2 of the summary of the principles to be applied, only required that Almona’s claims against SAP and PT be “substantially connected or dependent the one to the other”.

261. Thirdly, SAP argued that there was nothing in its conduct that would make it proper for the Court to exercise its discretion to make a Sanderson order in the present case. This submission focused on Almona’s reliance upon the concealment of the Occupation Condition as the relevant fraud. SAP submitted that the Court did not find in favour of Almona in respect of the wider fraud case leading to the transfer of the Land to Parklea and the granting of the PT Mortgages. The Court specifically found that, although there was dishonesty in respect of the concealment of the Occupation Condition, the transfer would have occurred anyway, so the fraud was not a cause of the transfer or the granting of the PT Mortgages: see Almona 1 at [705]. Consequently, the conduct of SAP upon which Almona relied to support the Sanderson order was not conduct that required or justified the making of Almona’s claim against PT.

262. I accept this third submission. If the conduct that justifies the making of a Sanderson order may be the conduct complained of by the unsuccessful plaintiff as giving rise to the cause of action upon which the plaintiff has succeeded against the unsuccessful defendant, then it is necessary to look at whether the consequences of that particular conduct required or made it reasonable to join the successful defendant.

263. In that sense, if Almona had succeeded against SAP on its wider case that the transfer of the Land was procured by fraud, then it would have been necessary for Almona to join PT, in attempting to pierce PT’s indefeasible title to the PT Mortgages, because otherwise Almona could not enjoy the fruits of its success in gaining orders setting aside the transfer and requiring its reinstatement as registered proprietor. However, the fraud or dishonesty that Almona succeeded in establishing did not justify the joinder of PT, because it did not justify the making of an order setting aside the transfer of the Land.

264. The first submission put by PT against the making of the Sanderson order was in substance the same as SAP’s third submission. As stated, I accept the submission.

265. PT’s second submission was based upon the judgment of the Court of Appeal in Willett v Thomas [2012] NSWCA 97 at [210]. The submission was that Almona’s claim for a Sanderson order is wrong as a matter of principle. The conduct of the unsuccessful defendant that makes it fair for the Court to make a Sanderson order against that defendant for the benefit of the unsuccessful plaintiff must be conduct “post-dating the wrong for which” the unsuccessful defendant was sued, and it must be that subsequent conduct which has led the plaintiff to sue the successful defendant. PT relied upon the fact that the conduct relied upon by Almona was part of the wrongdoing alleged against Parklea and SAP.

266. In Willett v Thomas Macfarlan JA said:

[209] In my view the primary judge erred in concluding that a different order should be made (see [110]–[112] above). I do not agree with him that the principles stated in Gould v Vagellas at 229–230 and Turano (No 2) at [16] were satisfied.

[210] In essence those principles require that the court find that “the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant” (Gould v Vagellas at 230 per Gibbs CJ; see also the third consideration referred to in Turano (No 2) at [16]). Such conduct cannot, contrary to what is implicit in the primary judge’s reasoning, comprise the conduct of the unsuccessful defendant that gave rise to the unsuccessful defendant’s liability. If that was so it would be appropriate to make a Bullock (see Bullock v London General Omnibus Co [1907] 1 KB 264) or Sanderson order in most, if not all, cases in which a plaintiff had acted reasonably (although unsuccessfully) in suing another defendant.

267. Basten JA agreed with Macfarlan JA at [72]. It is not clear that PT’s submission that Young JA at [236] also agreed with Macfarlan JA is correct. His Honour may have indirectly done so by agreeing with the orders that Basten JA proposed, but the better view may be that Young JA did not deal with the points about Sanderson and Bullock orders in his judgment.

268. As appears from [211] of Macfarlan JA’s reasons, his Honour based his conclusion on the aspect of the judgment of Gibbs CJ that is extracted above in which the Chief Justice said that it was difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff’s error or overcaution in suing this successful defendant “if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant”. Macfarlan JA gave the example in [212] of an unsuccessful defendant who “when sued or threatened with suit… tells a plaintiff that it is suing the wrong party and gives reasons why the plaintiffs should sue” the successful defendant.

269. PT’s submission that I am bound by the principle upon which it relies based upon Willett v Thomas appears to be correct. That is a second reason for me to reject Almona’s application for a Sanderson order.

267. I have noted Almona’s submissions, in pars 3 to 6 of its written reply dated 21 April 2020, in which Almona listed 10 aspects of the conduct of Parklea and SAP in these proceedings, which it submitted constituted conduct of those defendants after the conduct that constituted the cause of action, and which fell within the conduct of the unsuccessful defendant that Willett v Thomas requires. That conduct consisted of delay in filing defences, non-responses to requests for discovery and notices to produce, delay in filing evidence, piecemeal production of documents, the hiding of the true relationship between PAG and Dyldam, the denial of engaging in fraudulent and dishonest conduct, disclosing at the last minute that no witnesses would be called, the acceleration of the completion of the Contract, tendering documents whose production had been resisted, and relying upon PT’s indefeasibility of title to prevent Almona getting the relief it sought.

268. Even if it were accepted by the Court that Parklea and SAP had engaged in the conduct as alleged, it was all conduct that occurred after the commencement of the proceedings, and accordingly after Almona had elected to sue PT. None of the conduct could rationally have been a cause for Almona to sue PT.

269. In any event, even if the conduct occurred, and even if it was delinquent, it could only be conduct that might support some claim by Almona against Parklea and SAP for a special costs order. None of the conduct has anything to do with the making of, or the success or failure of, Almona’s claim against PT. It is not relevant to whether the making of a Sanderson order is justified.

270. It is not in the circumstances necessary for me to reflect in detail upon the correctness of the principle relied upon by PT. However, I note with respect, that Gibbs CJ said “nothing that the unsuccessful defendant has said or done”. It is not clear from the Chief Justice’s words that he intended to confine the words or deeds of the unsuccessful defendant to events occurring after the completion of the cause of action upon which that defendant is found liable. In different circumstances, the present case could have provided a good example of why it would be fair to make a Sanderson order against an unsuccessful defendant because of an aspect of that defendant’s wrongful conduct. If A fraudulently causes the title to Blackacre, of which B is the registered proprietor, to be transferred to C, who then becomes the registered proprietor, it will not avail B to prove the fraud against A alone. Section 42 of the Real Property Act 1900 (NSW) will require B to join C to the proceedings, if there is a reasonable prospect that the dealings between A and C will support a finding that C was a party to A’s fraud in accepting the transfer and becoming registered proprietor of Blackacre. Otherwise, B will only be left with some personal claim against the fraudster, A. Because it is often difficult to prove fraud, B may succeed against A, but fail against C. B’s need to sue C will have been caused by A’s conduct as part of A’s wrongdoing. Why should not A be ordered to pay B’s costs of B’s unsuccessful claim against C?

271. Thirdly, PT submitted that it would not be fair to make it reliant upon Parklea and SAP for the payment of its costs, which would be the result of the making of a Sanderson order, because the evidence casts considerable doubt on the capacity of those defendants to pay PT’s costs. PT points to the fact that Almona has formally acknowledged that it will seek third-party costs orders against the persons standing behind Parklea and SAP, if it obtains an order for costs against them.

272. In its submissions, Almona does not address the issue of financial risk, which in practical terms underlies the difference between the making of a Sanderson and a Bullock order. Given that Almona chose to sue PT and failed, what is it that makes it fair to require PT to bear the risk of the other defendants’ insolvency, rather than Almona? There may be no general answer to what fairness requires in this context, but it is likely only to be fair to make a Sanderson order when there is reason for the Court to believe that the defendant who is subject to the order has the capacity to meet it. A Bullock order has the attraction that the ultimate financial risk falls on an unsuccessful party rather than a successful one.

273. Finally, PT submitted that the fact that Parklea is obliged by clause 16 of the Loan Note Subscription Agreement to reimburse PT for the costs of preserving its rights in the PT Mortgages is not a ground supporting the grant of a Sanderson order.

274. PT asserted that the current debt is over $200 million, and that interest continues to accrue at the rate of 22% per annum. According to PT, there is no reason for thinking that the value of the Land would be sufficient to cover the outstanding debt, particularly given that the last known valuations in 2015 were in the realm of $67.5 million to $70 million.

275. In its reply submissions, Almona challenged the assertions made by PT that are summarised in the preceding paragraph, and submitted that there is no evidence concerning the present value of the debt and the value of the Land. In any event, Almona asserted that the debt is also secured by mortgages over other properties.

276. Almona submitted that the facts asserted by PT do not matter because, under the transaction documents, PT has a secured right of priority in respect of its costs of preserving the PT Mortgages.

277. In my view, the existence of a secured contractual right in a successful defendant to recover that defendant’s costs from an unsuccessful defendant is irrelevant in principle to the question of whether the Court should make a Sanderson order in favour of a plaintiff who is unsuccessful against that defendant against a defendant in respect of whom the plaintiff is successful.

278. It is true that Parklea promised contractually to pay PT’s costs of preserving the PT Mortgages, but that promise was not given for the benefit of any third party in the position of Almona who may cause PT to incur the preservation costs by reason of a failed claim to set aside the PT Mortgages. Although the issue was not addressed at the hearing, there is at least a real likelihood that the Loan Note Subscription Agreement would be subject to an implied term that PT would at least take reasonable steps to defray its costs of preservation of the PT Mortgages by seeking to enforce its costs order against Almona.

279. In any event, if the obligation to pay PT’s costs of the proceedings is placed upon the Land as a priority debt under the PT Mortgages, that will affect the security position of Lord III, which is not a party to these proceedings. If the present debt is in fact greater than the value of the Land, PT’s cost of the proceedings would be thrown on Lord III. The transaction documents may have that effect, but this issue demonstrates why the terms of the transaction documents must be ignored for the purpose of deciding whether a Sanderson order should be made. PT should be entitled to pursue whatever costs order it thinks appropriate, and that application should be decided upon relevant principles without regard to any alternative avenue available to PT to recover its costs. Otherwise, in reality, the interests of Lord VIII will be affected, without it having been joined as a party.

280. I add that I accept PT’s supplementary submission that Almona’s claim against PT “fell away” because the Court found in Almona 1 that the fraud that was committed by SAP to which Parklea was a party was not a cause of the transfer of the Land to Parklea for the granting of the PT Mortgages to PT. The primary reason why Almona’s claim against PT fell away is because it was a frontal attack on the indefeasibility of a plainly innocent registered mortgagee that failed because the technical arguments put by Almona against indefeasibility were unsuccessful.

281. Finally, I have not given any effect to Almona’s repeated claims that Parklea and SAP were found to have been dishonest, as costs orders are made for compensatory purposes and are not meant to be punitive.

Release of monies paid as security for costs

285. As the Court will make an order that Almona pay PT’s costs of the proceedings, it follows that an order should also be made that the monies paid as security for PT’s costs should be paid out to PT. As I understand it, the relevant amount is the sum of $140,000 the subject of the order 1 made by the Court on 19 December 2018.

286. As PT wishes to maintain its application for a gross sum costs order, the orders to be made to give effect to these reasons for judgment should include an agreed timetable for the service of evidence and submissions on that issue, and the provision of that material to my associate.

287. It may be that it will be sufficient for the gross sum costs application to be dealt with on the papers in chambers. If necessary, I will hear Almona and PT on that issue by arrangement with my associate.

288. The Court also made orders on 19 December 2018 concerning security for Parklea’s costs. As I understand it, those orders were made on an unusual basis. The Court noted that Almona had asserted, but Parklea had denied, that Parklea was liable to pay Almona a sum of approximately $354,000 by way of reimbursement of rental arrears from stallholders at the Parklea Markets. The Court noted, by note 4, an agreement, which had the effect of preserving Almona’s right to pursue a claim for the rental arrears, if “at the conclusion of this proceeding and any appeals therefrom, no order for the First Defendant’s costs has been made against the Plaintiff and the Plaintiff and the First Defendant have not agreed the amount owing by way of Rental Arrears”.

289. Relevantly, the Court also made the following orders:

1.   By 14 January 2019, the First Defendant deposit into an interest-bearing controlled money account (account) with Norton Rose Fulbright Australia (NRFA) the amount of $326,394 (representing part of the disputed amount of Rental Arrears).

2.   NRFA will hold the money referred to in order 1 in the Account as security for the First Defendant’s costs of this proceeding.

3.   If, at the conclusion of this proceeding and any appeals therefrom, no order for the First Defendant’s costs has been made against the Plaintiff and the Plaintiff and the First Defendant have agreed the amount owing by way of Rental Arrears (Agree Amount) then:

(a)   if the Agreed Amount exceeds the amount held by NRFA in the Account, then NRFA will pay to the Plaintiff the whole of the amount held in the Account in reduction of the Agreed Amount; or

(b)   if the Agreed Amount is less than the amount held by NRFA in the Account, then NRFA will pay to the Plaintiff the Agreed Amount from the amount held in the Account and will pay to the First Defendant the balance of the monies in the Account.

290. Parklea’s notice of motion which otherwise sought an order for security for costs was dismissed.

291. In its written submissions, Parklea claimed an order that the amount held by its solicitors in a controlled money account be released to it in partial payment of the costs order in its favour, as well as a consequential order that it be relieved from any indebtedness to Almona in respect of the rental arrears.

292. The premise, upon which that submission was made, that the Court would make a cost order in favour of Parklea, has not been fulfilled.

293. More significantly, order 3 has the effect that the order will continue until the determination of any appeals by Almona and Parklea from the orders made by the Court at first instance in these proceedings. That time has not yet arrived. The Court should not disturb the operation of order 3 except on a formal application and after the receipt of appropriate submissions.

294. I infer from Parklea’s submissions that there is not now any agreement between Almona and Parklea concerning the rental arrears. Parklea has until the end of any appeal process to pursue that issue.

295. In these circumstances it is premature to make the orders sought by Parklea.

296. SAP, in its written submissions, submitted that the Court should not make any order that the security provided by Almona for SAP’s costs be released to Almona until the present proceedings are litigated to finality.

297. In relation to the finalisation of the proceedings, SAP pointed to the fact that Almona continues to pursue an order for an inquiry and accounting by SAP in respect of the mortgagor-mortgagee relationship.

298. On 19 December 2018, the Court made the following orders by consent on SAP’s notice of motion seeking an order for the provision of security for its costs:

1.   By 21 December 2018, the Plaintiff pay into Court the amount of $200,000 for stages 1 and 2 of the Second Defendant’s costs of the proceedings.

2.   The monies referred to in Order 1 be held by the Court towards security for the Second Defendant’s costs of this proceeding.

299. The effect of these reasons for judgment is that the Court will not make an order for costs in SAP’s favour in respect of the hearing to this stage of the proceedings.

300. However, as SAP submits, the proceedings at first instance are not yet complete, and it remains possible that the Court will order Almona to pay SAP’s costs of any inquiry and accounting.

301. As noted in Dal Pont at [28.65] (footnotes omitted):

Case authority dictates that a plaintiff who pays money into court as security for the defendant’s costs of the action, and succeeds in the action and secures a costs order in his or her favour, is entitled to have that money paid out of court as soon as judgment is entered, notwithstanding that the defendant has secured a stay of execution pending an appeal. This continues to represent the law unless modified by statute or the court rules.

302. In my view, this principle will also apply where a plaintiff has succeeded on part of its claim, and failed on another part, with the result that the Court does not order either the plaintiff or the defendant to pay the other’s costs.

303. Unlike the case of the special order made as between Almona and Parklea, the order for security for costs in favour of SAP was not made until the conclusion of any appeal.

304. However, at this stage, all the Court knows is that the order for security for costs was made on 19 December 2018 by consent, and it is not clear whether SAP’s application for security only embraced the proceedings that have now been determined, or whether it extended to the costs of any inquiry and accounting. It is at least possible that the Court may be entitled to have regard to the evidence served by SAP in support of its security for costs application in order for the Court to determine the costs that the security that Almona agreed to provide was intended to cover.

305. If the security was only by agreement intended to cover the cost of the proceedings to date, then an order should be made releasing the amount of the security to Almona. It would be necessary for SAP to apply for a stay of that order pending an appeal, if it was so advised.

306. That is a matter that the Court should not decide without the benefit of submissions from the parties.

307. For the reasons that I have explained above, the issue of what orders should be made in relation to the inquiry and accounting sought by Almona against SAP cannot properly be determined in these reasons. It may be that the issue of the release of the Security to Almona should be dealt with in the context of further consideration of that issue.

308. I will not make an order that the $200,000 be released to Almona now, but I will receive further submissions from Almona and SAP, at any time, after they are exchanged between the parties.

Orders

309. It will be necessary for the parties to consider these reasons for judgment and to provide my associate with draft short minutes of order to give effect to them.

310. I will set out below in summary form my understanding of the orders that can now be made. The parties are invited to make suggestions in respect of any matters for which my summary is not complete.

311. The draft short minutes of order should deal with the following: –

1. Order 1 at [8] should be made.

2. Revised orders 3, 4 and 5 at [23] should be made. An accelerated return date for the notice of motion the subject of order 4 should be inserted after discussion with my associate. The dates for the provision of evidence and submissions in orders 4 and 5 should be changed to accommodate the early return date.

3. Although I will not now make orders 7 to 10 at [57], an order should be made granting leave to Almona to revive its application for an inquiry and account at any time on notice to SAP.

4. Order 12 at [80] should be made now.

5. Unless any of Almona, Parklea and SAP wish to pursue the suggestion that the costs orders as between them should be sent to a referee, then orders should be made now that there be no order as to costs as between them, on the basis that each of them will bear their own costs of the proceedings.

6. In respect of orders 20 and 21 at [97], an order for PT's costs against Almona should be made in appropriate terms now. The order could be drafted in a way that reserves PT's entitlement to pursue a gross sum costs order. Case management orders should be included for the purpose of allowing Almona to respond to the application. Almona and PT should consider the issue of whether the application may be dealt with in chambers on the papers.

7. At [87], I noted Almona's desire to have its entitlement to make an application for a gross sum costs order against any parties to be reserved. I indicated that I would give that leave. However, if orders are made as between Almona, Parklea and PT that have the effect that they will bear their own costs, then the need for the prosecution of applications for gross sum costs orders will abate.

8. An order should be made as contemplated by [285] that the security provided for PT's costs be paid out to it.

9. Almona and SAP should provide for the completion of the argument concerning payment out to Almona of the security that it provided for SAP's costs that is discussed at [303] to [308].

Almona v Parklea Attachment (93.5 KB, pdf) ​​​​​​​                          **********

Decision last updated: 12 May 2020